Trade as an element of national security

DISAM Journal, Winter, 2003 by E. Anthony Wayne

[The following are excerpts from the speech presented to the California Chamber of Commerce International Trade Breakfast in, San Francisco, California, December 5, 2003.]

My topic today is how trade fits into US national security interests. How growth contributes to our security trade liberalization is a key pillar to self-sustaining growth for our economy, for growth in other industrialized countries, and, in particular, for growth in developing countries, your customers and suppliers not only in the future, but today as well.

Economic growth brought about by free trade, free markets, and investment creates new jobs and raises incomes. The effect of such growth lifts people out of poverty as it spurs economic reform. But trade is not just about economics. Free trade is about freedom and open societies. With all our developing countries partners with whom we are negotiating free trade agreements, in such places as Central America and Southern Africa, we seek to establish the basic building blocks for sustainable development, private property rights, competition, the rule of law, transparency, the free flow of technology, and regional integration. People who trade with each other and invest in each others economies are less likely to wage war against each other. In essence, a strong world economy based on free trade and solid investment regimes advances not only prosperity, but also peace and freedom around the world, thereby enhancing our own national security.

Trade Liberalization Benefits

Both at Home

We have seen a virtuous circle on trade at work in our own economy as total trade as a percentage of overall output has grown from around ten percent three decades ago to nearly thirty percent today. Trade was a major, though mostly underestimated aspect of US growth throughout the 1990s. As a result of North Atlantic Free Trade Agreement (NAFTA) and the World Trade Organization's Uruguay Round of tariff cuts in the 1990s, lower cost goods now available in nearly every store in America save an average American family of four $1,300 to $2,000 each and every year. The gains could be greater. A University of Michigan study projects that lowering US import tariffs by just one third more would boost family purchasing power by an additional $2,500.

As trade grows, it brings our economy more competition and lower prices, and this engenders higher living standards, lower costs for business, and this in turn means more consumption and more investment, making our economy more resilient, more competitive, and stronger. And, in turn, a stronger economy has increased export capacity and higher demand for imports, completing the virtuous circle.

And Abroad

I am probably preaching to the choir here, but the benefits of trade liberalization far outweigh the benefits of foreign aid. Not to minimize the importance of foreign assistance which wisely channeled can play an important part in creating the conditions that attract trade and investment in the first place, but helping developing countries to participate fully in the World Trade organization (WTO) and the global economy provides several times the benefits in growth and development than foreign aid alone.

According to the World Bank, total free trade in all goods, including agriculture, would result in a gain in world income of some $830 billion; 65 percent of which would flow to developing countries, helping an estimated 300 million people escape out of poverty more than the entire population of the United States. In contrast, developing countries receive only about $50 billion a year in direct assistance from donor governments.

Anti-globalization activists claim that developing countries have little to gain and much to lose from trade and growth. In fact, abundant research demonstrates that developing countries have much to gain from opening their markets to trade and everything to lose by staying closed to global commerce. The impact of trade is one of the issues that distinguishes South Korea from North Korea, for example.

When trade grows, income grows. The World Bank conducted a study of developing countries that opened themselves to global competition in the 1990s, and of those that did not. The income per person for more open developing countries grew more than five percent a year, while incomes in more closed poor countries grew just over one percent.

The World Trade Organization

Despite the disappointment over the lost opportunity at Cancun, we remain committed to the World Trade Organization and to the Doha Development Agenda. We have made bold and sweeping proposals to liberalize trade in both agricultural and industrial goods. Concrete progress on removing those trade barriers would still be the most significant contribution that WTO members could make to global economic development.

Regional and Bilateral Trade

The fate of trade liberalization does not depend solely upon what happens at the WTO. We will also continue to pursue regional and bilateral free trade agreements with countries that share our commitment to undertaking meaningful economic reform and trade liberalization.